Estate Planning, Trusts and Wills

 The Revocable, or “living,” Trust is often promoted as a means of avoiding probate and saving taxes at death and is governed by Chapter 736, Florida Statutes. The Revocable Trust has certain advantages over a traditional will, but there are many factors to consider before you decide if a Revocable Trust is best suited to your overall estate plan.

What is a Revocable Trust?

A Revocable Trust is a document (the “Trust Agreement”) created by you to manage your assets during your lifetime and distribute the remaining assets after your death. The Trust is “revocable” since you may modify or terminate the Trust during your lifetime, as long as you are not incapacitated.

During your lifetime the Trustee invests and manages the Trust Property. Most Trust Agreements allow the Grantor to withdraw money or assets from the Trust at any time, and in any amount. If you become incapacitated, the Trustee is authorized to continue to manage your Trust assets, pay your bills, and make investment decisions. This may avoid the need for a court-appointed guardian of your property. This is one of the advantages of a Revocable Trust.

Upon your death, the Trustee (or your successor if you were the initial Trustee) is responsible for paying all claims and taxes, and then distributing the assets to your beneficiaries as described in the Trust Agreement. The Trustee’s responsibilities at your death are discussed below.

Your assets, such as bank accounts, real estate and investments, must be formally transferred to the Trust before your death to get the maximum benefit from the trust. This process is called “funding” the Trust and requires changing the ownership of the assets to the Trust. Assets that are not properly transferred to the Trust may be subject to probate. However, certain assets should not be transferred to a Trust because income tax problems may result. You should consult with your attorney, tax advisor and investment advisor to determine if your assets are appropriate for Trust ownership.

What is Probate?

Probate is the court-supervised administration of a decedent’s estate. It is a process created by state law to transfer assets from the decedent’s name to his or her beneficiaries. A personal representative is appointed to handle the estate administration. The probate process ensures that creditors, taxes and expenses are paid before distribution of the estate to the beneficiaries. The personal representative is accountable to the court as well as the estate beneficiaries for his or her actions during the administration. For probate estates having less than $75,000 of non-exempt assets, Florida law provides a simplified probate procedure, known as summary administration.

Are All Assets Subject to Probate?

No, only assets owned by a decedent in his or her individual name require probate. Assets owned jointly as “tenants by the entirety” with a spouse, or “with rights of survivorship” with a spouse or any other person will pass to the surviving owner without probate. This is also true for assets with designated beneficiaries, such as life insurance, retirement accounts, annuities, and bank accounts and investments designated as “pay on death” or “in trust for” a named beneficiary. Assets held in Trust will also avoid probate.

How Does a Revocable Trust Avoid Probate?

A Revocable Trust avoids probate by effecting the transfer of assets during your lifetime to the Trustee. This avoids the need to use the probate process to make the transfer after your death. The Trustee has immediate authority to manage the Trust assets at your death; appointment by the court is not necessary.

The “funding” of a Revocable Trust is critical to successfully avoid probate. Those persons who do not fully fund their Trusts often need both a probate administration for the non-trust assets as well as a Trust Administration to completely distribute the assets. Because the Revocable Trust may not completely avoid probate, a simple “pour over” will is needed to transfer any probate assets to the Trust after death.

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It is important to know that we are NOT attorneys and cannot give legal advice. We are document preparers and do not work under the supervision of an attorney but instead provide document preparation services to the general public.